XWELL, Inc. (XWEL) - Q3 2025 10-Q Summary
Business Context and Reporting Period
This summary covers the quarterly period ended September 30, 2025. XWELL, Inc. operates as a global wellness organization with three reportable segments: XpresSpa (airport spa services), XpresTest (bio-surveillance and public health support), and Naples Wax Center (hair removal and skincare). The company is classified as a non-accelerated filer and a smaller reporting company.
Key Financial Metrics
| Metric | Q3 2025 (3 Months) | Q3 2024 (3 Months) | YTD 2025 (9 Months) | YTD 2024 (9 Months) |
|---|---|---|---|---|
| Total Revenue | $7.35M | $8.42M | $22.06M | $26.43M |
| Gross Profit | $1.49M | $2.05M | $4.59M | $7.80M |
| Operating Loss | $(0.77M) | $(4.77M) | $(6.62M) | $(9.04M) |
| Net Loss (Attributable to XWELL) | $(0.72M) | $(4.75M) | $(7.71M) | $(9.26M) |
| Cash & Equivalents | $3.99M | $4.55M (Dec '24) | Restricted Cash: $0.25M | |
| Working Capital | $0.76M | $6.11M (Dec '24) | Current Liabilities: $10.06M | |
| Derivative Liability | $0.80M | $0 | Warrant Liability: $0 (Reclassified to Equity) |
Material Changes vs. Prior Period
- Revenue Decline: Q3 2025 revenue decreased 13% year-over-year, primarily due to reduced CDC bio-surveillance revenue in XpresTest compared to the prior year and lower surge billing in XpresSpa.
- Improved Operating Loss: Operating loss narrowed significantly from $4.77M in Q3 2024 to $0.77M in Q3 2025. This improvement was driven by a 76% reduction in General and Administrative (G&A) expenses, largely due to a $2.34M Employee Retention Credit (ERC) recognized in the current period and reduced legal/accounting costs.
- Impairment Charges: The company recorded $0.48M in impairment charges during Q3 2025, including $0.36M for operating lease right-of-use assets (XWELL Studios) and $0.12M for long-lived assets.
- Foreign Exchange: A foreign exchange loss of $0.13M in Q3 2025 (vs. $0.07M in Q3 2024) was attributed to currency fluctuations in Turkey affecting lease liabilities.
- Financing Activity: In January 2025, the company completed a private placement raising $4.0M gross proceeds via Series G Convertible Preferred Stock and warrants. Warrants were reclassified from liability to equity in May 2025 following an amendment.
Guidance, Outlook, Risks, and Unusual Items
- Going Concern Warning: Management has concluded that substantial doubt exists regarding the company's ability to continue as a going concern for at least one year from the filing date due to recurring losses and insufficient liquidity. The financial statements do not include adjustments that might result from this uncertainty.
- Subsequent Event (Nov 2025): On November 3, 2025, the company entered into an Exchange Agreement to swap approximately $1.6M of Series G Preferred Stock for $3.4M in senior secured convertible notes. The notes bear 8% interest, mature in ~3.3 years, and are convertible at $1.00 per share.
- Internal Control Weaknesses: The company identified material weaknesses in internal controls over financial reporting, specifically regarding lease accounting (ASC 842), revenue processes, and monitoring controls over foreign subsidiaries and IT vendors.
- Legal Proceedings: An arbitration proceeding is ongoing with the City of Atlanta regarding XpresSpa operations at Hartsfield-Jackson Atlanta International Airport. A hearing is scheduled for March 2026.
- Nasdaq Compliance: The company regained compliance with the Nasdaq Minimum Bid Price Rule in August 2025 after a period of non-compliance.
Investor Verification Checklist
- Liquidity Runway: Verify the sufficiency of current cash ($3.99M) against the $10.06M in current liabilities and the "substantial doubt" going concern disclosure.
- Debt Structure: Review the terms of the new $3.4M senior secured convertible notes issued in November 2025, including the 8% interest rate, 15% penalty rate on default, and conversion mechanics.
- Revenue Sustainability: Assess the reliance on the CDC/Ginkgo Bioworks contract for XpresTest revenue, noting the decline in Q3 2025 compared to 2024.
- Internal Controls: Monitor the remediation plan for material weaknesses in lease and revenue accounting, which could impact future financial reporting reliability.
- Preferred Stock Terms: Examine the amended Series G Preferred Stock terms, including the reduced conversion price of $1.00 and the removal of the 200% cash covenant.